Milk giant wages war on farm co-op

DAIRY giant Unigate is trying to split farmer-owned United Milk to prevent the new group from processing its own milk, it was claimed this week.

Unigate fired the first salvo in what threatens to become more than a war of words by writing to all UM members recently, offering to buy their milk direct.

In its letter, Unigate described UMs decision to set up a £30 million operation to process 500m litres of milk a year as well intentioned, but misplaced.

“It is our firmly held belief that [this] cannot be in the best or long-term interests of its members and producers generally,” wrote Brian Pocock, head of agricultural affairs.

There is surplus capacity in the industry, he added. Increasing output would allow supermarkets take full advantage, leading to further erosion milk prices.

“Many of you have indicated you are concerned at the risk you are being asked to take and as an alternative… we are offering with effect from 1 October, 1999 our new Unigate Business Deal Direct,” he continued.

Mr Pocock said Unigates move was triggered by UMs unwillingness to discuss its plans, even though it supplies Unigate with almost 500m litres of milk.

“United Milks decision to process clearly puts our supply base at a potential risk. And you cant suddenly go from being a supplier to a competitor.”

UM is incensed at the action and will be taking advice, and organising meetings to decide how it should respond to the move.

“It is obviously an attempt to split up United Milk,” said general manager Chris Austen.

More than 100 of UMs 800 members had already contacted headquarters and all but one was totally supportive.

Mr Austen accused Unigate of discriminatory pricing, with UM receiving about 0.5ppl less than the direct deal price, which is 19.013ppl before transport deductions, thought to be about 0.35p.

But Mr Pocock made no apologies.

“We will pay the best price to people who share our long term aims. All of our groups negotiate prices – some negotiate better than others.”

Roger Metcalf of Agrifood Consultants suspects producers may find it hard to resist the Unigate deal.

“My guess is that United Milks ranks will be divided, and it will suddenly find its cupboard very empty.”

But Philip Hudson, NFU dairy advisor, said the union would support United Milk if it decided to seek legal advice.

“If Unigate intends to divide United Milk to prevent it from processing milk, we would see this as a potential competition issue,” he said.

Meanwhile, Express Dairies has joined the fray, by serving notice on its UM suppliers midweek that most contracts would end in 12 months.

“United Milk told us that most of the milk wont be available to us when their plant is up and running,” said Express chief Neil Davidson.

Milk giant wages war on farm co-op

DAIRY giant Unigate is trying to split farmer-owned United Milk to prevent the new group from processing its own milk, it was claimed this week.

Unigate fired the first salvo in what threatens to become more than a war of words by writing to all UM members recently, offering to buy their milk direct.

In its letter, Unigate described UMs decision to set up a £30 million operation to process 500m litres of milk a year as well intentioned, but misplaced.

“It is our firmly held belief that [this] cannot be in the best or long-term interests of its members and producers generally,” wrote Brian Pocock, head of agricultural affairs.

There is surplus capacity in the industry, he added. Increasing output would allow supermarkets take full advantage, leading to further erosion milk prices.

“Many of you have indicated you are concerned at the risk you are being asked to take and as an alternative… we are offering with effect from 1 October, 1999 our new Unigate Business Deal Direct,” he continued.

Mr Pocock said Unigates move was triggered by UMs unwillingness to discuss its plans, even though it supplies Unigate with almost 500m litres of milk.

“United Milks decision to process clearly puts our supply base at a potential risk. And you cant suddenly go from being a supplier to a competitor.”

UM is incensed at the action and will be taking advice, and organising meetings to decide how it should respond to the move.

“It is obviously an attempt to split up United Milk,” said general manager Chris Austen.

More than 100 of UMs 800 members had already contacted headquarters and all but one was totally supportive.

Mr Austen accused Unigate of discriminatory pricing, with UM receiving about 0.5ppl less than the direct deal price, which is 19.013ppl before transport deductions, thought to be about 0.35p.

But Mr Pocock made no apologies.

“We will pay the best price to people who share our long term aims. All of our groups negotiate prices – some negotiate better than others.”

Roger Metcalf of Agrifood Consultants suspects producers may find it hard to resist the Unigate deal.

“My guess is that United Milks ranks will be divided, and it will suddenly find its cupboard very empty.”

But Philip Hudson, NFU dairy advisor, said the union would support United Milk if it decided to seek legal advice.

“If Unigate intends to divide United Milk to prevent it from processing milk, we would see this as a potential competition issue,” he said.

Meanwhile, Express Dairies has joined the fray, by serving notice on its UM suppliers midweek that most contracts would end in 12 months.

“United Milk told us that most of the milk wont be available to us when their plant is up and running,” said Express chief Neil Davidson.